Key Issues

in Contraband Tobacco

Revelations about British American Tobaccco and smuggling

On Jan. 31st, 2000, the prestigious English daily The Guardian, in co-operation with the International Consortium of Investigative Journalists, published a major exposé on British American Tobacco (BAT) and cigarette smuggling in numerous countries. This exposé, the fruits of many months of work by a team of investigative journalists, is available on the Internet, along with a host of supporting documents. It shows detailed evidence relating to smuggling in Latin America and Asia

Since the publication of the original exposé, the British House of Commons Health Select Committee has unanimously adopted a report recommending an official investigation by the Department of Trade and Industry into allegations of BAT involvement in cigarette smuggling in different parts of the world. On Oct. 30th, 2000, British Secretary of State Stepen Byers accepted the committee’s advice and appointed investigators to look into BAT’s activities.

On July 31st, 2000, a new batch of Guildford documents relating to cigarette smuggling in Africa were also made public.

Meanwhile, lawsuits have been filed against BAT and other companies relating to smuggling in Latin America, and a lawsuit by the European Union is pending. [See “What do we know about cigarette smuggling in other parts of the world?” below.]

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London-based BAT has long been the dominant player in the Canadian tobacco market. In the early 1990s, when cigarette smuggling became a major political issue in Canada, BAT had a controlling share of Imasco, a holding company that in turn owned Canada’s biggest cigarette manufacturer, Imperial Tobacco. Imasco also owned Canada Trust, the Shoppers Drug Mart pharmacy chain, and a series of smaller companies.

On Feb. 1st, 2000, BAT completed a major re-structuring of its Canadian interests. This re-structuring involved selling off Canada Trust and all other non-tobacco companies, buying out all minority shareholders of Imasco, and taking Imasco private. That is, publicly traded Imasco has ceased to exist, and Imperial Tobacco of Canada now answers only to head office in London, England. The entire move is in line with BAT’s global strategy of selling off its non-tobacco interests and buying up other cigarette companies, with a view to eventually overtaking US-based Philip Morris as the world’s largest tobacco multinational.

BAT has also bought Rothmans International BV, which used to be the indirect majority shareholder of Canada’s Rothmans, Benson & Hedges (RBH), this country’s second-largest tobacco company. However, the federal Competition Bureau insisted that BAT sell off its controlling interest in RBH. BAT was unable to find a single buyer for its indirect stake in RBH. The stake was finally sold via a secondary share offering.

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